Debt is a ticking-time bomb for the Chinese economy. In the past three years central government stopped local governments from financing through investment vehicles and set a cap for the issuance of bonds. But new forms of debt continue to be formed. Local officials appear not to care about borrowing more, as long as the money can be used in projects that may translate to political achievements. And with those achievements, officials will be promoted to a higher level–as will the debt burden. A more worrisome thought will be: can those additional government debts and investments support China’s long-term growth?
China’s economic growth over the past few decades has impressed the world. But the world’s second largest economy now faces a difficult transformation: from relying on exports and investments to developing domestic demand. That’s not easy. Government-led stimulus is only a temporary solution and only looked reasonable in the first few years after the recent global financial crisis. In fact, the main problem facing the Chinese economy has been the weak demand in domestic market which manifested clearly in 2006, and became more obvious when growth slowed down.
On the morning of June 24, 2016, China woke up to witness an unexpected drama unfolding half a world away. The previous day, millions of UK citizens had voted on whether the UK should remain in the European Union, and all opinion polls, betting and market expectations pointed firmly towards ‘Remain.’ But as the early results came in, the startling prospect of Brexit became a reality. Some people think “Brexit has indeed diminished Beijing’s hopes of treating the UK as a strong advocate for China in the EU”, and there are another voices like “The Chinese… have other ways to penetrate the EU market, for example [through] Greece,” and in a sense they are both right. How will China and the UK’s “Golden Relationship” play out in the Post-Brexit era?
China has achieved almost miraculous advancement in a mere 30 years, but at the same time is beset with a host of structural problems and contradictions that it must grapple with, especially as economic growth begins to slow. In this interview, Kroeber, the author of China’s Economy: What Everyone Needs to Know, a comprehensive introduction to China’s rise from an economic backwater in the early 1980s to the world’s second-largest economy, offers his analysis to CKGSB Knowledge on how China got here, where it might be headed, and how to understand the changes and implications.
When I was in grade school, fights would occasionally break out on the playground. The commencement of these fights was usually hard to predict: one boy would make a remark to another boy that he did not like, the words would become more heated and then a fight would erupt. Fortunately, these fights usually subsided quickly with no one hurt. Fights between firms can also occur. It is usually in firms’ interests to cooperate and keep prices high. Despite this, firms sometimes engage in ruinous price wars. Although often as unpredictable as schoolyard skirmishes, fights between firms are sometimes a bit more predictable. Here’s how.
PBOC’s move to devaluing the RMB didn’t just follow weak exports data, but also IMF requirements for more market-driven exchange rates.
Early indications show that the Chinese government’s efforts to prop up the economy might be able to steer clear of the risks of the 2009 economic stimulus
Does China’s debt, which refuses to stop growing, threaten to take the show off the road?
The RMB exchange rate is caught between two powerful forces: the surging Dollar and China’s rising power.
CKGSB’s Business Sentiment Index shows that China’s industrial economy has finally stabilized after a year of contraction.